How much do you pay for liquidity? This is a question I’ve often asked myself. I know at our Fund, Sax Angle Partners, we like to tell ourselves and our investors, that our exceptional liquidity (we have no lock-ups just 30 day notice) is worth something. Now we know what the world’s largest endowment thinks liquidity is worth.
How much added return do you need in private equity, in return for tying up your money for five or 10 years?We should be getting an incremental return for that illiquidity—and we call that our illiquidity premium—of at least 300 basis points [three percentage points] annually on average over what we are expecting in publicly traded stocks.